Trading on the London Stock Exchange (LSE) ground to halt today after a computer crash struck during one of the busiest sessions of the year.

Links between traders and the exchange were severed from just after 9am because of a "connectivity issue", bosses said, allowing no pricing data to be updated.

The stoppage came as the FTSE 100 Index soared nearly 4% in the wake of the US Government bail-out of mortgage giants Fannie Mae and Freddie Mac, one of the biggest rises this year.

The FTSE 100 Index - which measures the share prices of the UK's top 100 listed firms - froze at 5440.2 at 9.17am, where it has been stuck since.

At lunchtime the LSE said it was "continuing to establish connectivity" with its customers, but officials were unable to say when normal trading would resume or what the cause of the problem was.

The glitch saw City institutions resort to "blind trading" between themselves, as well as relying on other rival pricing mechanisms to do business. City veteran David Buik, from BGC Partners, said many clients were "furious" at the glitch.

The episode will come as an embarrassment for the LSE, which is facing increasing pressure from rival share trading operations.

One competitor, Turquoise, launched live trading last week, with two other rivals due to roll out trading in pan-European equities over the coming months.

In a letter published today in the Financial Times, LSE Group chief executive Clara Furse said better use of technology had seen the Exchange's share trading in UK equities exceed 50%".

But she added: "The emergence of new trading platforms should test the attractiveness of our services."

Shares in London Stock Exchange Group have fallen more than half since the start of the year.

Mr Buik said of today's episode: "Many European clients are furious. We hear this first hand."

He also warned the problems could see the LSE "lose a larger share of the cake than would be palatable".

There was speculation the problems may have happened as LSE systems struggled to cope with the high volume of trades this morning. Banks shares were particularly in demand today, with HBOS up 13% and Barclays 12% ahead.

Keith Bowman, equity analyst from broker Hargreaves Lansdown, said around 270 million FTSE 100 Index company shares were traded this morning before the suspension.

The whole of last Monday - a quieter session because of the closure of US markets - saw 617 million blue chip shares bought and sold, he added.

An incident report published at 10.25am on the LSE website said: "Currently no orders can be entered and/or deleted, and no executions will occur."

James Hughes, market analyst at CMC Markets, said some trades had been taking place between City institutions despite the frozen exchange.

But the lack of central LSE data meant investors were effectively "trading blind", he said.

"Some trades have been happening," Mr Hughes said.

"But people can't get their prices to the LSE and nothing is coming back from there as well, so you can't be sure how accurate they are."

Stock markets were buoyed by yesterday's intervention into the Fannie Mae and Freddie Mac, which own or guarantee more than five trillion US dollars (£2,800bn) worth of mortgages between them.

The pair have lost more than 14 billion dollars (£8bn) in the last year due to the slumping US housing market but their collapse would cause global turmoil as their bonds are held by major investors worldwide.

The US Treasury has placed the duo into a "conservatorship", replacing the bosses and effectively wiping out existing shareholders in the two firms, who have in any case seen the value of their holdings fall by more than 90% in the past year.

The US taxpayer could be exposed to tens of billions of dollars in soaring mortgage defaults at Freddie Mac and Fannie Mae, but US Treasury Secretary Henry Paulson stressed that the impact of allowing the two to fail would be far more serious.

Paris's Cac 40 soared nearly 5% in the wake of the news, with Germany's Dax up more than 3%. Asian markets were also well up overnight.